Finance In China Research Articles

China and the Baltic States: strategic challenges and security dilemmas for Lithuania, Latvia and Estonia

Abstract The article considers traditional and non-traditional security concerns faced by the Baltic states of Estonia, Latvia and Lithuania in the face of China’s increasing presence. Consequently the article first considers the geo-economic challenges posed to these Baltic States through the China and Central and East Europe Countries (CCEEC) grouping, and China’s Silk Road Economic Belt (SREB) initiative. This economic leverage translates to political leverage able to be exerted on the Baltic states by China, with regard to human rights and the issue of the Dalai Lama. Moreover, such mechanisms and Chinese financing serves to politically divide the Baltic states, and also divides EU solidarity vis-à-vis China. Finally there are the conventional security issues posed to the Baltic states in the Russia-China naval exercises carried out in Baltic waters in 2017; with China’s role in effect providing implicit support and legitimisation of explicit Russian threats in the Baltic. It concludes by suggesting alternative infrastructure routings to at least reduce the threat of Russian interference.

The Evolution of Shadow Banking System in Emerging Economies: The Role of Entrusted Loans in Chinaas Capital Market

In this paper, we analyze the Chinese economic growth model post-2008 and more notably the effect of 4 Trillion Yuan stimulus in the aftermath of the Global Financial Crisis. We look at the Chinese financial system and the credit creation mechanism in the economy. The data shows that post-2008 there has been a sudden increase in credit outside the formal banking system. We specifically focus on the o-balance sheet Entrusted Loans provided by non-bank entities via the shadow banking system. We explain the entrusted loan mechanism and the rapid increase in Non-bank credit. Our stress tests results for the 15 major banks in China indicate that the banks remain well capitalized in the case of an idiosyncratic shock, notably the SIFI’s but can experience contagion through the Interbank funding market via smaller banks.

Reframing labour market mobility in global finance: Chinese elites in London’s financial district

ABSTRACTIn this paper, I use the case of elite Chinese financial mobility to London’s financial district to argue that comparatively neglected forms of elite financial migration from beyond the Global North provide important insights into the changing geographical form, and labour market practices within, leading international financial centres. Empirically, the paper identifies a distinctive geographical footprint of Chinese financial mobility to London in terms of both financial services activity and residential choices. Theoretically, I argue that explaining this geography requires work on highly skilled migration that typically privileges the economic motivations underpinning mobility to engage more fully with wider debates in economic geography that examine the inter-dependencies and inter-relationships between states and markets. These findings raise important questions surrounding the durability of Chinese finance in London, its relationship to global finance in London more generally, and wider understandings of elite financial labour markets.

The Effect of Local Subsidy Competition on Excess Capacity in China: Empirical Study Based on Propensity Score Matching-DID

Local governments subsidize enterprises directly or indirectly by various means, which may lead to the over-investment behaviors of enterprises and then induce serious overcapacity problem. How do local government behaviors affect the production and capacity decisions of the enterprises? Previous studies primarily focus on the impacts of institutional factors on overcapacity but ignore the problem of information asymmetry in the market. Moreover, only a few researchers have done the empirical studies on this topic. This paper combines Chinese unique institutional background and asymmetric information environment to build a two-period dynamic game model with incomplete information, so as to explore a new mechanism of the impact of local subsidy competition on overcapacity in China. We find that the excess capacity ratio induced by local subsidy competition is larger than the normal excess capacity ratio when the market information is asymmetric. And the more subsidies an enterprise receives, the more likely the industry has overcapacity. Based on the micro-data of enterprises from 2001 to 2007 in China, this paper uses the propensity score matching difference-in-difference method to do the empirical test. The results show that: for those enterprises who have received the subsidies, the overcapacity rate after the subsidies rises by about 1% to 3%. And compared with those non-subsidized enterprises, the overcapacity rate of subsidized enterprises rises by about 2% to 12%, which indicates that local subsidies could significantly inhibit the capacity utilization rate of enterprises and exacerbate the overcapacity. This paper provides not only empirical evidence for the impact of local subsidies on overcapacity, but also some policy implications for the governments to deal with overcapacity. Firstly, the interest distribution mechanism between central and local governments should be rationalized, such as improving Chinese financial management system, which could be an institutional method used to regulate the behavior of local governments. Secondly, it is necessary to strictly formulate and implement the local subsidy rules and the local administrative accountability system, so as to strictly inhibit the local irregular and excessive subsidies. Thirdly, an effective adjustment mechanism for the local subsidies ought to be established to adjust the local subsidy structure actively and exert the overall benefits of local subsidies. The marginal contributions of this paper are as follows: firstly, on the basis of Lin Yifu’s wave phenomenon”, this paper pays attention to the subsidy competition of local investments. We construct a dynamic game model with incomplete information to explore the new mechanism of how local subsidy competition affects the overcapacity. Moreover, we take the lead in using the propensity score matching difference-in-difference method to empirically test the impact of local subsidy competition on overcapacity, and focus on the changes in capacity utilization of enterprises before and after local subsidies. It not only can effectively alleviate the endogenous problem, but also provides some empirical and technical reference for follow-up research.

Sustainable Local Public Finance in China: Are Muni Bonds the Structural Solution?

We assess the economic and institutional factors that have driven the growth of debt in China. We ask whether there is a clear strategy for managing the risk that such debt levels pose and assess the likelihood that policy actions will prove successful. In particular, we explain how much of the growth of debt is attributable to particular features of Chinese local public finance and why a program involving swapping municipal bonds for older city construction bonds and other debt has emerged as a crucial component of the Chinese strategy. We assess this strategy in detail and argue that this constitute a deep structural reform that is having clear and important consequences for the structure of China’s domestic debt markets. We present evidence that these changes in structure are being reflected in bond market pricing.

Measuring Systemic Risk and Financial Fragility in the Chinese Financial System

This paper studies systemic risk and financial fragility in the Chinese economy, applying the dynamic factor model approach. First, we estimate a dynamic factor model to forecast systemic risk that exhibits significant out-of-sample forecasting power, taking into account the effect of several macroeconomic factors on systemic risk, such as economic growth slowdown, large corporate debt, rise of shadow banking, and real estate market slowdown. Second, we analyse the historical dynamics of financial fragility in the Chinese economy over the last ten years using factor-augmented quantile regressions. The results of the analysis demonstrate that the level of fragility in the Chinese financial system decreased after the Global Financial Crisis of 2007-2009, but has been gradually rising since 2015.

How to Improve Transportation Investment Management: To Introduce Negative List

As a management mode, negative list has been applied succeffuly in the management of foreign investment in China. The paper analyzes the necessity and feasibility of the application of negative list to the investment management for the transportation industry. After that, it discusses how the mode is applied in the investment management for the transportation industry. In conclusion, the application of negative list can improve the investment management for the transportation industry and promote the investment in the industry greatly.

How to Improve Transportation Investment Management: To Introduce Negative List

As a management mode, negative list has been applied succeffuly in the management of foreign investment in China. The paper analyzes the necessity and feasibility of the application of negative list to the investment management for the transportation industry. After that, it discusses how the mode is applied in the investment management for the transportation industry. In conclusion, the application of negative list can improve the investment management for the transportation industry and promote the investment in the industry greatly.

The regulation of the financial sector in China: a tale of two governments

ABSTRACTThis article discusses an important regulatory phenomenon in China’s securities markets: regulation by local governments. Multi-level financial market regulation is an intrinsic part of the Chinese financial regulatory system, and the article looks at the nature and dynamics of the role played by local governments, and interactions between the central government and local governments. The article commences with a review of the degrees of economic decentralisation and political centralisation evident in China. The article then discusses the struggle between local governments and the central government that arise from competing objectives. After reviewing regulatory powers of local governments in general, and their powers to regulate credit companies, financing guarantor companies, private capital management companies, and regional markets, the article examines the competition between local governments for financial resources and its implications.

THE IMPACT OF DIRECT FOREIGN INVESTMENT ON THE DEVELOPMENT OF ECONOMY IN CHINA

The article analyzed the structure of inflow and outflow of direct foreign investment in China during the last decade. The author shows specific features and trends of investment cooperation with key economic partners and Chinese jurisdictions (Hong Kong, Taiwan). The sectoral principle of distributing the flow of direct foreign investment was discussed, which is used for raising and export of foreign capital in industries and service sector to safeguard interests of national security of China economy. The article pointed out to the impact of M & A deals as an alternative to investment projects from the ‘green field’ on Chinese economy growth. It identifies problems connected with disproportion in the development of industrial sector and service sector of the western and central parts of the country and seaside regions. The author demonstrates the key factors and trends in the active expansion policy of Chinese capital on foreign markets at the current stage.

The Rise of Patient Capital: The Political Economy of Chinese Global Finance

As the United States has retreated from its lead role in globalization – first because of the 2008 financial crisis, and now under President Donald Trump’s leadership – China has become a major global financial player. China, as the world’s largest saver, has rapidly expanded its cross-border lending since the crisis, more than doubling its overseas banking presence. What are the implications? I contend that China’s state-led capitalism is an important form of patient capital, characterized by a longerterm horizon. While technically classified as mobile capital, its higher risk tolerance and geopolitical shrewdness make state-owned capital less likely to swiftly exit debtor countries. Compared to traditional mobile capital, debtor governments thus gain more policy freedom, particularly during hard times when Western creditors might otherwise impose austerity and other onerous policy conditions. Employing an originally constructed dataset, the China Global Financial Index, I conduct an econometric test across 15 Latin American countries from 1990-2015. I find that Chinese state-to-state lending reduces governments’ reliance on conditionality-linked Western financing, giving them more autonomy to use budget deficits to intervene in their economies. This effect is also contingent on partisanship, with extreme, or populist left governments being most likely to enhance their budgetary discretion. These results suggest that Chinese financing could be a development opportunity, but only if governments invest wisely. Otherwise, by lending without policy conditions, China may be encouraging developing country governments to spend without bounds, sowing the seeds for future debt problems.

Risks in China's Financial System

Motivated by growing concerns about the risks and instability of China's financial system, this article reviews several commonly perceived financial risks and discusses their roots in China's politico-economic institutions. We emphasize the need to evaluate these risks within China's unique economic and financial systems, in which the state and nonstate sectors coexist and the financial system serves as a key tool of the government to fund its economic policies. Overall, we argue that ( a) a financial crisis is unlikely to happen in the near future and ( b) the ultimate risk lies with China's economic growth, as a vicious circle of distortions in the financial system lowers the efficiency of capital allocation and economic growth and will eventually exacerbate financial risks in the long run.

Risks in China's Financial System

Motivated by growing concerns about the risks and instability of China’s financial system, this article reviews several commonly perceived financial risks and discusses their roots in China’s politico-economic institutions. We emphasize the need to evaluate these risks within China’s unique economic and financial systems, in which the state and non-state sectors coexist and the financial system serves as a key tool of the government to fund its economic policies. Overall, we argue that: (1) financial crisis is unlikely to happen in the near future, and (2) the ultimate risk lies with China’s economic growth, as a vicious circle of distortions in the financial system lowers the efficiency of capital allocation and economic growth and will eventually exacerbate financial risks in the long run.

The Unfinished Business of State-owned Enterprise Reform in the People’s Republic of China

This paper examines the progress of state-owned enterprise (SOE) reform in the People’s Republic of China. After defining SOEs and considering their scope of operation within the PRC economy, the focus of the paper is on the major reform waves that followed the deterioration of SOE profitability in the early 1990s. The oil industry serves to illustrate industry-specific SOE reform trends as well as the latest reform developments. Until today, a stable, successful, longterm arrangement of state ownership has remained elusive. SOE reform is incomplete as long as a number of fundamental governance issues are not resolved. But these are difficult to resolve in the context of Party-controlled state-owned enterprises.

中美众筹三方主体行为特征对比及对我国的启示

中美众筹三方主体行为特征对比及对我国的启示

Agricultural Subsidies and Rural Family Entrepreneurship—Empirical Analysis Based on Chinese Microdata

Using the data of Chinese household finance survey in 2011, this paper has used the binary regression model of discrete variables to examine the influence of agricultural subsidy policy on rural family entrepreneurial behaviors. Empirical research shows that agricultural subsidies significantly lower the probability of the rural family entrepreneurial behaviors. On average, every 1 per cent increase in agricultural subsidies would reduce the probability of rural family entrepreneurship by 15.6 percentage points. At the same time, the influence of agricultural subsidies on family entrepreneurial probability is heterogeneity: agricultural subsidies have significantly reduced the probability of rural family entrepreneurship in low-social network groups and non-main producing areas, but have not significantly reduced the probability of rural family entrepreneurship in high-social network groups and major grain-producing areas. Further study found that agricultural subsidies affect the transmission mechanism of rural family entrepreneurial probability: agricultural subsidies—raising agricultural income and reducing the probability of entrepreneurship. Finally, this paper puts forward that it should give full play to comparative advantage and implement regional differentiation subsidy strategy; we will vigorously develop inclusive finance to improve the rural credit environment.

Research on the Development of Enterprise Group Finance Companies of Business Group: An Overview

The finance company first appeared in the West. In 1987, China's first financial company was established. At the end of the third quarter of 2016, China has 234 financial companies, financial companies have become an important part of China's modern financial system. However, with the development of China's finance company of enterprise group, gradually exposed the financial company in the business scope, risk awareness, the lack of independence, etc. In order to prepare for further research, this paper summarizes some literature on the discussion of financial companies. This literature has studied and explored the orientation, development, efficiency and risk awareness of financial companies respectively.

Model for evaluating the international competitiveness of financial system with fuzzy number intuitionistic fuzzy information

At present, China has been a member of WTO for five years, the protection period has been past. So it is pretty meaningful to discuss how to improve the competitiveness of Chinese financial system both in theories and reality. The premise of improving competitiveness of Chinese financial industry i s to correctly assess the present Chinese financial industry’s competitiveness level. It is under the above background that the author tries to analyze and evaluate the competitiveness level of Chinese financial industry. In this paper, we investigate the multiple attribute decision making problems with fuzzy number intuitionistic fuzzy information. Firstly, we analyze several operations on the fuzzy number intuitionistic fuzzy sets. We develop the induced fuzzy number intuitionistic fuzzy Hamacher correlated geometric (IFNIFHCG) operator. Then, we use the IFNIFHCG operator to solve multiple attribute decision making with the fuzzy number intuitionistic fuzzy information. Finally, an illustrative example for evaluating the international competitiveness of financial system is given to verify the developed approach.

Does the Special Tax Zone Policy Still Matter for Foreign Investment in China? An Analysis Based on the Evolution of China’s Special Tax Zones

This article reviews the evolution of China’s policies on special tax zones since 1980. It discusses the change in the country’s approach upon the introduction of the Enterprise Income Tax Law in 2008. The author argues that China modified its special tax zone policies from that year to comply with World Trade Organization requirements, to conform with international norms and to address increasing regional disparity in its domestic economic growth, without giving up its economic development strategy of attracting foreign investment.

JOT-CREDIT PROBLEMS OF RURAL CREDIT COOPERATIVE AND SUGGESTIONS: THE CASE OF XIN LE COUNTRY, SHIJIAZHUANG CITY, HEBEIPROVINCE, CHINA

The rural credit cooperative is an important part of financial system in China. The jot credit provided by rural credit cooperative serves as an important financial tool for its members. The reformation of rural credit cooperatives on 2014 has further strengthened the important of jot credit in Hebei province, China. However, there are problems in the jot credit as shown by the increasing income gap between the rich and poor. This warrants a study to unveil the problem of rural credit cooperative’s jot credit and suggestions to improve the jot credit. Using the case of Xin le Shijiazhuang, Hebei province, this paper aims to explore the rural credit cooperative’s jot credit problem and suggest potential solutions. Results reveal that there are high demand for loan among the peasants. However, the tedious application procedure, rigidity in the duration and terms of loan, are the problems that discouraging jot credit usage among the peasants. It is suggested that the scope of service, duration and terms of loan to be expanded to meet the diverse needs of peasants. In addition, the nimble rate should be implemented on the jot credit by stages. The jot credit is the new direction of the credit business development. Peasants have high enthusiasm in repayment and the non-performing loan is in a downward trend. Meanwhile the jot credit, to certain extent, still has some problems to be tackled.Keywords: Rural Credit Cooperative; Jot-Credit Problems; Xin Le Country.